We have studied the mechanism of action of the HIV-1 Tat, HTLV-I Tax, and HTLV-l Rex proteins. We have made the following salient observations: 1) HIV-1 Tat acts as a transcriptional trans-activator of LTR-directed expression. Tat uses a bipartite target that includes both a nascent RNA and specific DNA elements within the LTR promoter. 2) The HIV-2 Tat protein acts like HIV-1 Tat, except that it requires a duplicated TAR RNA secondary structure for optimal activity. 3) A cellular protein that binds with specificity to the HIV-1 TAR RNA appears to be a general transcriptional factor. 4) HTLV-I Tax has pleiotropic up- and down-regulatory activities. Multiple protein domains within Tax are apparently necessary to mediate these diverse functions. 5) A novel transcriptional function for HTLV-I Rex has been observed. Our current understanding is that modulation of the HIV-l/HTLV-I LTR is mediated through complex interactions between cellular transcription factors and the viral trans-regulatory proteins.